Chevy Silverado Drives Big Gains for GM

The Chevy Silverado is set to be replaced soon, but it's still posting big sales increases.
Photo credit: General Motors Co.

General Motors (NYSE: GM  ) said on Wednesday that its U.S. sales had risen 11% in April versus the year-ago month, on strong sales of its pickups and several new models.

That's likely ahead of the overall market's growth in April, a sign that GM is starting to gain ground. Those gains should increase as the year goes on, with GM set to launch a slew of new models in a big effort to update its North American product line.

New models were a big part of GM's story in April. But as ever, pickups were the star of the show – even though GM's all-new pickups won't be out for a few more months.

Strong sales of GM pickups – without huge discounts
As at rival Ford (NYSE: F  ) , full-sized pickups were a big story at GM. Increases in U.S. housing starts and other construction industry indicators led many to expect that 2013 would be a strong year for pickup sales, and so far the numbers haven't disappointed.

Sales of GM's mainstay pickup, the Chevy Silverado, were up 28.1% in April, an impressive gain. That gain is made even more impressive by the fact that GM didn't have to hike its incentives excessively to do it.

"Incentives" are those cash-back or cheap-financing deals that you see in TV ads. They're funded by automakers and used to offer discounts when the market seems to demand them. Incentives have been part and parcel of the pickup business for years – all of the automakers use them to some extent.

With the Silverado and its GMC Sierra counterpart set to be replaced soon, many expected GM to boost its discounts – a common tactic with an outgoing model. Concerns were exacerbated by GM's high pickup inventories late last year. But GM officials said on Wednesday that their pickup incentives were actually down versus last April, by about $250 a truck, and down about $190 from last month. Average transaction prices on GM's big pickups were up over $500 versus last April, they said.

A key part of GM's strategy for boosting profits
That's a good sign. GM has been talking for a while about its desire to reduce its dependence on incentives, part of CEO Dan Akerson's global push to increase GM's profit margins. GM sold more vehicles around the world than Volkswagen (NASDAQOTH: VLKAY  ) last year, and wasn't far behind Toyota (NYSE: TM  ) – but it trailed both in profits by a wide margin.

Akerson would dearly love to close that gap. Strong sales of full-sized pickups – among GM's most profitable products – will help a lot. Remaining disciplined on incentives will also help, and that's a task that should get easier as more of GM's new models start to show up at dealers.

Should you consider buying GM stock now?
Few companies lead to such strong feelings as General Motors. But ignoring emotions to make good investing decisions is hard. The Motley Fool's premium GM research service can help, by telling you the truth about GM's growth potential in coming years. (Hint: It's even bigger than you think. But it's not a sure thing, and we'll help you understand why.) It might help give you the courage to be greedy while others are still fearful, as well as a better understanding of the real risks facing General Motors. Just click here to get started now.

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